Rumors of the death of the housing market may be exaggerated

Rumors of the death of the housing market are exaggerated, economists said.

The chief executive of Redfin RDFN, -22.39% sounded alarmed, speaking of a “significant slowdown,” as the real-estate website issued a profit warning.

“There have been a lot of stories that housing is done. These stories are a little premature,” said Richard Moody, chief economist at Regions Financial Corp.

Moody said analysts seemed to be conflating woes in the existing-home market that have been caused by lean inventories.

So far in 2018, single-family construction is running 7% faster than last year’s pace, he noted. Permits are 5.7% higher.

The Commerce Department will release the July housing starts report on Thursday at 8:30 a.m. Eastern.

Economists surveyed by MarketWatch expect housing rates to rise 8% in July after a dramatic 12.3% drop in the prior month. Moody noted that housing starts also had a decent 4.8% rise in May.

Other analysts think any improvement in starts is likely to be slow.

“Housing starts continue to be inhibited by supply-side constraints such as skilled construction labor shortages and rising building material costs,” said Lew Alexander, chief U.S. economist at Nomura

Michael Gregory, deputy chief economist at BMO Capital Markets in Toronto, said he expects a rebound of more than 8% in July including in the multifamily sector which saw a 19.8% drop in June.

Gregory said the underlying trend for housing starts is no longer “constantly climbing” and is more about converging to a steady state. Affordability is becoming an issue owing to rising home prices and mortgage rates, he noted.